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PVRs On Track To Becoming Recording Format of Choice

27 Jul, 2002 By: Holly J. Wagner

Plenty of hardware makers are hoping to make recordable DVD the next big wave in home electronics, but hard-drive digital video recorders (DVRs) are poised to become the digital recording media of choice, new reports suggest.

DVRs, also called personal video recorders (PVRs), will be in one-quarter of TV homes by the end of 2008, The Carmel Group estimated in its new DVR Competitive Market Report.

The biggest obstacle to PVR penetration is that consumers don't understand its benefits, that study and Jupiter Media Metrix' Understanding the Interactive Television Consumer agreed.

PVR penetration is on the upswing, and satellite TV providers are better positioned to offer interactive services than cable companies, the analysts reported.

“Unlike cable's fragmented network, satellite has the capability of using one satellite ... to broadcast data across the entire U.S.,” VP and senior analyst Sean Badding wrote in the Carmel report. “This advantage has allowed Direct Broadcast Satellite (DBS) providers to spend less money and time building and upgrading its infrastructure that potentially reaches hundreds of millions, while at the same time the biggest cable company reaches mere tens of millions.”

Satellite consumers have been the first to embrace PVRs, partly because satellite programming has always been digital (hence, storable on a hard drive) and because subscribers are more affluent.

The big five PVR makers based on units placed are TiVo and OpenTV (575,000 each),

Microsoft's Ultimate TV(140,000), SonicBlue (120,000) and Digeo (Moxi) (25,000), according to the Carmel report. How well each company will do over the next four or five years depends, to a large degree, on which cable and satellite providers choose them.

Most cable companies prefer to brand the set-top boxes they buy from other companies, while satellite subscribers buy their own set-top boxes and often have more options.

Cable has the market to lose by not offering in-demand interactive technologies to subscribers, according to Jupiter's consumer survey.

Some satellite operators are delivering the interactivity that consumers want: pause and rewind of live programming (41 percent), video-on-demand (27 percent), electronic programming guides (25 percent) and TV-based e-mail (12 percent).

The formula aligns closely with Jupiter's findings regarding leisure time pursuits. Responding to the question, “If you have free time in the evening or weekend, which one of the following are you more likely to do?” the majority of consumers (31 percent of men and 26 percent of women) said “watch TV.” But “go online” was a close second (27 percent and 25 percent, respectively), so the theory behind interactive television is spot-on: unify the two most popular leisure pursuits into one box.

Jupiter senior analyst Lydia Loizides forecasted 72 percent of digital cable households and 77 percent of digital satellite households — 33.2 million cable and 19.4 million households respectively — will be interactive by 2007. Carmel Group's Badding predicted 25 percent of homes will have PVRs by 2008.

Badding posited that PVRs may be a far more competitive technology, going head-to-head with other recordable options.

“The momentum DVRs have carried has created a nearly unstoppable force and, with the added attractiveness of ‘cool technology,' the DVR will become the natural descendant to the VHS,” he wrote. “The sales crossover of VHS to DVR will take at least 10 years to transition but without question, it will occur.”

Hollywood lawsuits aiming to torpedo some of that “cool technology” — namely ad skipping and sending programs to other viewers — could severely impact his projections, Badding noted, although he believes the courts will support the technology.

“The fact that certain business models will need adjusting and some corporations will have to change or wither and die is hardly ground enough to stand in the way of such inevitable progress, which benefits so many in such clear and tangible ways,” he wrote.

Whether the courts agree remains to be seen, but it seems clear consumers have embraced PVRs.

As with the DVD player, PVR prices should drop and household penetration accelerate accordingly. “The average starting price tag for a DVD [player] was $500. The average starting price tag for a PVR was $500,” Badding wrote.

However, he predicts the pace of PVR adoption won't match that of DVD, the most rapidly adopted home entertainment format of all time.

“In the first 10 years of product life cycle, DVDs and DVRs will penetrate an estimated 77 percent and 26 percent of households, respectively.”

In addition, manufacturers are starting to marry the technologies. RCA recently released its Scenium digital entertainment line, which includes a DVD-enabled PVR. That configuration is a likely powerhouse because it lets consumers watch pristine, prerecorded DVDs and record and store their choice of live events from the same box.

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